damages would be paid to the conference, as in the abovedescribed malpractice situation, with distribution of the funds being directed to the conference's self-policing costs (see Appendix, Article XI (D)).

Of course, lines that operate strictly as Independents could agree voluntarily to operate under the jurisdiction of a conference's neutral body in the same conditions. The lines involved could also contract with a neutral body of their own choosing. The Independent could levy certain conditions as to what personnel would investigate, adjudicate, etc. Such an agreement would assure the Independents that each of them, as well as the conference lines, is adhering to the appropriate tariffs. The agreement would also serve as the response by the Independent lines to the accusations of the conference lines, the response being that the Independent lines are not committing malpractices, and that allegations to the contrary are simply self-serving statements on the part of the conference lines.

If the Independents were to adopt this scheme to place all the lines operating in the U.S. foreign commerce under the ground rules of self-policing agreements, selfpolicing for the shipping industry would be truly selfregulated.

Closely related to the Commission's neutral body oversight responsibility is the issue of licensing neutral bodies. The purpose of licensing is to assure the competency of their personnel and adherence to the investigative standards set forth in Part X (D) of this report. Also important would be assurance from neutral bodies that their ethical standards are such that they have not condoned or tacitly ignored wrongdoing on the part of their own personnel, shippers and/or carriers. Failure on the part of a neutral body to pursue actively an allegation concerning wrongdoing would result in revocation of the neutral body's license.

Licensing of neutral bodies would be the Commission's control mechanism to insure that neutral bodies meet certain standards. A neutral body would have to demonstrate to the Commission, on a continuing basis, that it has complied with these important requirements, or lose its eligibility to police a conference in the U.S. commerce. Conversely, if, because of conditions within the conference, a neutral body could not in good conscience certify that it is policing effectively, it would be incumbent upon the neutral body to so notify the Commission, which then would take appropriate action against the conference involved.

B.

Delegation of Commission Investigative Authority to Neutral Bodies

It was not the intent of the Congress, when it enacted the Shipping Act of 1916, and especially Section 16 thereof, that violations would go undetected and that violators could act with impunity. Yet conference members claim that such is the situation insofar as the shipping practices of Independents are concerned. The previously mentioned refusal of the Office of Management and Budget to allow the Commission to add the manpower necessary to fulfill its statutory responsibilities is an indication to the Commission of the need to seek alternative solutions.

The proposal in Part XIII, above, that the neutral bodies acquire authority and necessary manpower from the

conferences to isolate alleged malpractices of Independents for investigative activities by the Bureau of Enforcement is the first part of a possible solution. Under the plan to have conferences isolate malpractices of Independents, the Bureau would divert the necessary manpower to investigate significant violations. However, this proposal has two possible weaknesses. The Bureau's personnel prognosis is such that, if a large number of alleged violations by Independents were isolated, the manpower crunch would present a serious obstacle. Further, there would be no routine monitoring of Independents under this proposal.

Accordingly, the second part of this possible solution would be for the neutral bodies not only to isolate the Independents' malpractices, but also to receive from the Commission a specific delegation of authority to investigate the allegations. If federal officials do not allow the Bureau of Enforcement the personnel necessary to meet its statutory responsibilities, they should authorize the Bureau to delegate this authority to a responsible, licensed investigative organization, i.e., a neutral body, so that the job can be done.

Inasmuch as the proposed Commission oversight mechanism and licensing provisions would give the Commission the ability to certify the capabilities and qualities of a neutral body, and since the Commission has the statutory responsibility for investigating violations of the Shipping Act, it should follow that the Commission should be able to delegate, or to contract out, some of its investigation and inspection prerogatives to neutral bodies which also investigate similar violations. This delegation of authority would serve the purpose of allowing neutral bodies to perform investigative tasks which they have the expertise to handle, and thus would serve the purposes of the Commission.

Delegation by a government agency to a well-qualified non-government entity of a responsibility of the agency is not without precedent. For instance, the American Bureau of Shipping's approved plans and certificates may be accepted by the Coast Guard as evidence of the condition of certain vessels. Approval of such documents is the basic responsibility of the Coast Guard (Title 46 U.S.C. 369 (h)).

Under the proposal, if a neutral body has a specific allegation about a shipper or an Independent's activities which are violations of the Shipping Act, with the suggested

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statutory authority, a Commission District Office could contract with a neutral body to commence an investigation. The neutral body would either obtain the investigative authority beforehand for a specific delegation or, immediately after discovering and investigating obvious aspects of the alleged malpractice, would obtain Bureau authority. The inquiry, which could extend to cargo inspection, would be conducted under the overall control of the Commission until such time as the Bureau of Enforcement might determine that the allegation is sufficiently substantive to warrant the commencement of proceedings. The delegation should contain sufficient authority to enable neutral bodies to review records of Independents, all conference lines, shippers, and forwarders in the United States. Any records they might be able to obtain overseas would be a side benefit of the proposal. The neutral body could be reimbursed for this undertaking by the Commission or by pools funded by conference assessments.

Expenses incurred by a line for self-policing costs, especially those projected for the sophisticated investigator-auditor approach, could represent a significant outlay by each of the lines. However, even under the present self-policing system, lines are reluctant to finance self-policing, especially in light of their tenuous profit margins. Such reluctance to provide for well-financed neutral bodies has resulted in the diminution of self-policing.

The neutral body concept is a financial burden imposed on all lines by statute. Self-policing by the conferences was required by Congress in partial recognition of the inherent difficulties a law enforcement agency would have in enforcing a United States law with extra-territorial complications. With delegation of responsibility to competent and effective neutral bodies to enforce the intent of the statute, there is no need to increase the staff and budgets of federal agencies that would normally have the enforcement responsibility for the Shipping Act.

Because of the consequent cost reduction to the U.S. Government, Congress should effect a quid quo pro. Specifically, the lines should be reimbursed by the U.S. Government

for investigative work done on behalf of the government. There is a precedent for the reimbursement concept, one such instance being in the field of education. This proposal would render more equitable the financial burden of self-policing that the Congress has imposed on United States and foreign lines.

Since cargo and document inspections are revenueproducing and self-sustaining, and since it can be argued that such inspections are carrier services, they are not included in the above proposal. Further, it is contemplated that reimbursement would be made only to the extent of investigative costs that exceed offsetting assessed damages. Damages for malpractices would no longer represent a direct or indirect gain to the lines in meeting investigative costs that they would be liable for in any event. Under this formula, damages assessed for malpractices would represent true out-of-pocket expenditures, and thus would serve as a meaningful deterrent to malpractices.